SINGAPORE: Fiscal projections in Singapore have frequently resulted in surpluses due to the volatility of the global environment, rather than the government being overly conservative, Prime Minister Lawrence Wong said on Thursday (Feb 26).
While such projections are done with the best available data, evolving global conditions mean it is harder to forecast Singapore’s economic growth, which is dependent on external conditions, said Mr Wong, who is also the finance minister.
Speaking at the close of the debate on Budget 2026, Mr Wong also reiterated the importance of the Goods and Services tax (GST) hike over 2023 and 2024.
He explained that while revenue is expected to increase from the 2027 financial year, the overall expenditure needs of the country are also rising.
In response to a call by MP Gerald Giam (WP-Aljunied) to re-evaluate the GST hike, Mr Wong said that while various tax revenue streams exist, the GST plays a “structural role” in funding the country’s rising expenditure.
The GST was increased from 7 per cent to 8 per cent in 2023, and then to 9 per cent in 2024.
While Singapore is expecting an increase in tax revenue from the 2027 financial year due to collections from the top-up taxes imposed for BEPS, that additional revenue does not replace the purpose of the funds from the GST increase, explained Mr Wong.
BEPS – base erosion and profit shifting – refers to tax planning strategies used by multinational firms to exploit gaps in tax systems and avoid paying a fairer share of tax. The top-up tax will subject large multinational enterprises operating in Singapore to a higher minimum effective tax rate of 15 per cent.
“The GST increase was introduced to fund rising, structural healthcare expenditure for an ageing population. These spending needs are permanent and will continue to grow, and they should be supported by a stable and reliable revenue base,” he said.
Mr Wong said that at the beginning of this decade, the government knew that healthcare spending would rise sharply, along with other areas such as social needs, the energy transition, security and infrastructure.
Notably, healthcare funding would see a “significant and permanent increase” in the second half of this decade, said Mr Wong.
While the government raised property taxes, motor vehicle taxes for luxury cars and the top marginal personal income tax rates, they were still not sufficient to close the structural funding gap, he said.
Mr Wong also noted that the WP had suggested raising the maximum Net Investment Returns Contribution (NIRC) that can be used in the annual national budget from 50 per cent to 60 per cent.
The NIRC allows the government to spend a portion of expected returns on reserves, supporting sustainable budgets.
“We did not agree with that proposal because the NIRC framework was carefully designed to safeguard intergenerational equity,” said Mr Wong.
“If we increase the cap to 60 per cent, that can ease immediate pressures, but it will weaken fiscal discipline, reduce our buffer for future shocks and shift a heavier burden onto the next generation.”
In the end, the GST remained the only broad-based and sustainable option to fund the healthcare needs, while preserving the country’s reserves framework, said Mr Wong.
“So the additional corporate tax revenues will strengthen our fiscal position and support these growing needs. But they do not replace the structural role of the GST, and especially what we have done to fund permanent and rising healthcare costs,” he said.
Mr Wong added that Singapore’s approach to taxation is a balanced one, with taxes kept moderate but progressive.
Resources are redistributed to those with greater needs, complemented with heavy investments in human capital, such as early childhood education, quality schooling and tertiary education, as well as lifelong learning, he said.
“Upward mobility remains central to our social compact because here in Singapore, your starting point should never determine your finishing position,” he said.
Mr Wong also addressed the issue of the government’s fiscal marksmanship, as questions on the Budget surplus were raised by Mr Giam and other MPs Alex Yam (PAP-Marsiling-Yew Tee), Louis Chua (WP-Sengkang) and Xie Yao Quan (PAP-Jurong Central).
He had announced in his Budget speech that Singapore’s budget surplus for the 2025 financial year is expected to come in at S$15.1 billion (US$12 billion), more than double the earlier estimate of S$6.8 billion.
Singapore recorded a surplus of S$6.4 billion in the previous financial year, up from an S$0.8 billion estimate.
“It's perhaps my favourite topic because, as I have shared before, I started work in MOF doing precisely this: fiscal projections,” said Mr Wong.
He said that Singapore’s forecast deviations are within a reasonable range, comparable to other advanced economies.
“Our projections are prepared by MOF economists using the best available data at the start of each financial year, including GDP growth assumptions at that time,” said Mr Wong.
Revenues in recent years have come in above projections, not because the government was overly conservative, but because of the difficulty in doing so amid an ever-evolving global environment, explained Mr Wong.
“For a small open economy, like Singapore, growth outcomes can diverge significantly from forecasts as global conditions evolve. Because we are so dependent on the external environment, forecasting Singapore's GDP growth is like forecasting the world's GDP growth, which is very, very difficult to do,” he said.
Revenues from property transactions or Certificate of Entitlement premiums are inherently difficult to predict, he added.
“But I assure everyone in this House and Singaporeans that our approach has been and will be responsible and professional,” he said.
In his speech, Mr Wong also addressed an insinuation that the People’s Action Party government “deliberately painted a doom and gloom picture for electoral advantage”.
WP chief Pritam Singh had in his Budget debate speech taken aim at the timing of the last General Election, saying it was called shortly after global trade tensions flared.
“The political timing of the General Election was calculated to put the PAP in the most advantageous position, with tariff uncertainty serving as a rallying call for voters to back the tried and tested," Mr Singh had said.
Mr Wong said that after the US Liberation Day tariffs, there was widespread uncertainty across the world, and the government had to move quickly.
“How many analysts projected 5 per cent growth for Singapore in 2025? I don't recall any. The reason why things did not turn out as badly as we feared was partly due to factors beyond our control, but also partly because of the decisive steps we took,” he said.
Efforts to engage the US to safeguard Singapore’s core interests, deepen links with other countries, and forge new agreements that sustain investor confidence deserve recognition, said Mr Wong.
“So let us not belittle these contributions just to score a political point. The fact that we are in a better position today than our projections is something we should all welcome. It's good news for Singapore and Singaporeans,” said Mr Wong.
He said that if the government had chosen back then not to raise GST and hoped for revenue upsides, and the economic situation then did not turn out well, “we would be having a very different debate today”.
“We will be scrambling to close fiscal gaps. We will be responding from weakness. But because we made the difficult yet responsible decision, because we chose responsibility over convenience, we are now in a position of strength,” he said.
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While such projections are done with the best available data, evolving global conditions mean it is harder to forecast Singapore’s economic growth, which is dependent on external conditions, said Mr Wong, who is also the finance minister.
Speaking at the close of the debate on Budget 2026, Mr Wong also reiterated the importance of the Goods and Services tax (GST) hike over 2023 and 2024.
He explained that while revenue is expected to increase from the 2027 financial year, the overall expenditure needs of the country are also rising.
GST HIKE NEEDED
In response to a call by MP Gerald Giam (WP-Aljunied) to re-evaluate the GST hike, Mr Wong said that while various tax revenue streams exist, the GST plays a “structural role” in funding the country’s rising expenditure.
The GST was increased from 7 per cent to 8 per cent in 2023, and then to 9 per cent in 2024.
While Singapore is expecting an increase in tax revenue from the 2027 financial year due to collections from the top-up taxes imposed for BEPS, that additional revenue does not replace the purpose of the funds from the GST increase, explained Mr Wong.
BEPS – base erosion and profit shifting – refers to tax planning strategies used by multinational firms to exploit gaps in tax systems and avoid paying a fairer share of tax. The top-up tax will subject large multinational enterprises operating in Singapore to a higher minimum effective tax rate of 15 per cent.
“The GST increase was introduced to fund rising, structural healthcare expenditure for an ageing population. These spending needs are permanent and will continue to grow, and they should be supported by a stable and reliable revenue base,” he said.
Mr Wong said that at the beginning of this decade, the government knew that healthcare spending would rise sharply, along with other areas such as social needs, the energy transition, security and infrastructure.
Notably, healthcare funding would see a “significant and permanent increase” in the second half of this decade, said Mr Wong.
While the government raised property taxes, motor vehicle taxes for luxury cars and the top marginal personal income tax rates, they were still not sufficient to close the structural funding gap, he said.
Mr Wong also noted that the WP had suggested raising the maximum Net Investment Returns Contribution (NIRC) that can be used in the annual national budget from 50 per cent to 60 per cent.
The NIRC allows the government to spend a portion of expected returns on reserves, supporting sustainable budgets.
“We did not agree with that proposal because the NIRC framework was carefully designed to safeguard intergenerational equity,” said Mr Wong.
“If we increase the cap to 60 per cent, that can ease immediate pressures, but it will weaken fiscal discipline, reduce our buffer for future shocks and shift a heavier burden onto the next generation.”
In the end, the GST remained the only broad-based and sustainable option to fund the healthcare needs, while preserving the country’s reserves framework, said Mr Wong.
“So the additional corporate tax revenues will strengthen our fiscal position and support these growing needs. But they do not replace the structural role of the GST, and especially what we have done to fund permanent and rising healthcare costs,” he said.
Mr Wong added that Singapore’s approach to taxation is a balanced one, with taxes kept moderate but progressive.
Resources are redistributed to those with greater needs, complemented with heavy investments in human capital, such as early childhood education, quality schooling and tertiary education, as well as lifelong learning, he said.
“Upward mobility remains central to our social compact because here in Singapore, your starting point should never determine your finishing position,” he said.
FISCAL PROJECTIONS FROM BEST DATA
Mr Wong also addressed the issue of the government’s fiscal marksmanship, as questions on the Budget surplus were raised by Mr Giam and other MPs Alex Yam (PAP-Marsiling-Yew Tee), Louis Chua (WP-Sengkang) and Xie Yao Quan (PAP-Jurong Central).
He had announced in his Budget speech that Singapore’s budget surplus for the 2025 financial year is expected to come in at S$15.1 billion (US$12 billion), more than double the earlier estimate of S$6.8 billion.
Singapore recorded a surplus of S$6.4 billion in the previous financial year, up from an S$0.8 billion estimate.
“It's perhaps my favourite topic because, as I have shared before, I started work in MOF doing precisely this: fiscal projections,” said Mr Wong.
He said that Singapore’s forecast deviations are within a reasonable range, comparable to other advanced economies.
“Our projections are prepared by MOF economists using the best available data at the start of each financial year, including GDP growth assumptions at that time,” said Mr Wong.
Revenues in recent years have come in above projections, not because the government was overly conservative, but because of the difficulty in doing so amid an ever-evolving global environment, explained Mr Wong.
“For a small open economy, like Singapore, growth outcomes can diverge significantly from forecasts as global conditions evolve. Because we are so dependent on the external environment, forecasting Singapore's GDP growth is like forecasting the world's GDP growth, which is very, very difficult to do,” he said.
Revenues from property transactions or Certificate of Entitlement premiums are inherently difficult to predict, he added.
“But I assure everyone in this House and Singaporeans that our approach has been and will be responsible and professional,” he said.
NOT DOOM AND GLOOM
In his speech, Mr Wong also addressed an insinuation that the People’s Action Party government “deliberately painted a doom and gloom picture for electoral advantage”.
WP chief Pritam Singh had in his Budget debate speech taken aim at the timing of the last General Election, saying it was called shortly after global trade tensions flared.
“The political timing of the General Election was calculated to put the PAP in the most advantageous position, with tariff uncertainty serving as a rallying call for voters to back the tried and tested," Mr Singh had said.
Mr Wong said that after the US Liberation Day tariffs, there was widespread uncertainty across the world, and the government had to move quickly.
“How many analysts projected 5 per cent growth for Singapore in 2025? I don't recall any. The reason why things did not turn out as badly as we feared was partly due to factors beyond our control, but also partly because of the decisive steps we took,” he said.
Efforts to engage the US to safeguard Singapore’s core interests, deepen links with other countries, and forge new agreements that sustain investor confidence deserve recognition, said Mr Wong.
“So let us not belittle these contributions just to score a political point. The fact that we are in a better position today than our projections is something we should all welcome. It's good news for Singapore and Singaporeans,” said Mr Wong.
He said that if the government had chosen back then not to raise GST and hoped for revenue upsides, and the economic situation then did not turn out well, “we would be having a very different debate today”.
“We will be scrambling to close fiscal gaps. We will be responding from weakness. But because we made the difficult yet responsible decision, because we chose responsibility over convenience, we are now in a position of strength,” he said.
Continue reading...